Consultation on SNRA with European NPOs,
organised by DG Justice
Third Consultation (Mar 2017)
Following a third consultation on March 14, 2017, NPOs prepared the following input for the EU.
Second Consultation (Oct 2016)
NPO response to initial findings of the EU Supra National Risk Assessment (SNRA)
The European Commission (DG Justice) is currently undertaking a supranational risk assessment (SNRA) of money laundering and terrorist financing risks. Initial findings presented by the EC in an October 4, 2016 consultation meeting suggest that some NPO activities (collection and transfer of funds) are considered risks for terrorism financing abuse. See here for the NPO response and input following this consultation.
Why this SNRA?
The EC is putting in place this broad framework for analysing terrorism financing risks in order to avoid blind spots and respond to the evolving nature of terrorism financing. The aim is to analyse the risks affecting the internal market and propose mitigating actions, including Recommendations to Member States (on a “comply or explain” basis) to address such risks as well as considering EU measures. The Commission has already designed the methodology for this assessment and started the process of analysis.
The stages of the conducting of the risk assessment process are outlined here. The aim is to end the assessment with an identification of mitigation measures in June 2017.
Initial findings from the EU SNRA
The EC categorized 16 “sectors and/or activities at risk” including the NPO sector. It identified two risk scenarios concerning NPOs:
- Collection of funds: The establishment of NPOs to “fund raise” for terrorist purposes domestically and across borders
- Transfers of funds: Criminals may abuse NPOs to fund localised terrorist activity, or may seek to use NPOs to facilitate cross-border financing by sending money to areas where NPOs operate close to terrorist areas of activity. While the threat and vulnerability of the two scenarios related to money laundering were considered by the EC in their initial findings as non-significant, they were considered significant for terrorism financing for the following reasons (even though the modus operandi is not frequently used by terrorist groups):
- when misused, NPOs represent a significant threat, in particular as far as foreign terrorist fighters are concerned. They can use NPO structures quite easily (easy to set up) and may access cash to finance their travels
- the transfer of funds through NPOs does not require specific expertise, in particular because cash is still the basis of a large number of transfers of funds considered.
The Terrorism Financing vulnerability related to the collection and transfers of funds by NPOs is also considered significant (level 3) for the following reasons:
- risk exposure: of NPOs located in high risk areas and high risk customers. The traceability of the source and transfers of cash donations (when sent abroad) are often difficult.
- risk awareness: no centralised framework, varies from one Member State to another. Authorities are not able to provide meaningful guidance or assistance. Risk awareness still low. Measures are often considered as overregulation. Humanitarian activities seek exemption from countering terrorism (financing) measures.
- legal framework and controls in place: the existing AML/ CFT framework is currently considered to be adequate to address the specific needs of the NPO sector. Control/registration processes vary between Member States. Competent authorities tend to consider that controls in place are quite good concerning the collection of funds within the EU. However, some weaknesses appear when dealing with the transfer of funds or expenditures outside the EU.
The draft NPO risk scenario can be found here
How can you engage?
Please send us (email@example.com)any comments/input you may have with regard to:
- The process? Product/Risk scenarios?
- TF threat? TF vulnerability?
The coalition has stressed to DG Justice the importance of obtaining comments and input to these scenarios from a diverse group of civil society actors. This is vital as the recommendations for an SNRA framework may potentially have far-reaching consequences for the European NPO sector.
First consultation (Feb 2016)
The European NPO Coalition on FATF was invited by the European Commission (EC) in February 2016 to provide input to an assessment of the risks of money laundering and terrorist financing affecting the internal market and relating to cross-border activities that the EC is currently conducting. This follows the entry into force of Directive (EU) 2015/849 on the prevention of the use of the financing system for the purposes of money laundering and terrorist financing (4th anti-money laundering Directive). This assessment is required by Article 6 of Directive (EU) 2015/849 and shall result in the publication of a report by June 2017. Based on this, the EC will make recommendations to Member States on the measures suitable for addressing the identified risks.
The results of this supranational risk assessment will impact the national risk assessment held by national competent authorities as well as obliged entities who will have to take them into account within the framework of the customer due diligence measures they will apply.
In this context, representatives of the NPO sector were invited by DG JUST to share their views on the EC’s preliminary findings (the risk matrix) and to present information relevant to the sector. The European NPO Coalition on FATF provided this draft preliminary input in March 2016. This note was revised in September 2016. The purpose of this current note is to inform the wider European NPO sector about the current state of play of the EU supranational risk assessment of money laundering and terrorism financing risks and how it relates to NPOs.